Notes to Financial Statements (Unaudited)
1 Significant Accounting Policies
Eaton Vance Floating-Rate Income Plus Fund (the Fund) is
a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, closed-end management investment company. The Fund’s investment objective is total return, with an emphasis on
income.
The following is a summary of significant accounting policies of the Fund. The policies are in conformity with accounting principles generally
accepted in the United States of America (U.S. GAAP). The Fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946.
A Investment Valuation — The following methodologies are used to determine the
market value or fair value of investments.
Senior Floating-Rate Loans. Interests in senior floating-rate loans (Senior Loans) for which reliable
market quotations are readily available are valued generally at the average mean of bid and ask quotations obtained from a third party pricing service. Other Senior Loans are valued at fair value by the investment adviser under procedures approved
by the Trustees. In fair valuing a Senior Loan, the investment adviser utilizes one or more of the valuation techniques described in (i) through (iii) below to assess the likelihood that the borrower will make a full repayment of the loan
underlying such Senior Loan relative to yields on other Senior Loans issued by companies of comparable credit quality. If the investment adviser believes that there is a reasonable likelihood of full repayment, the investment adviser will determine
fair value using a matrix pricing approach that considers the yield on the Senior Loan. If the investment adviser believes there is not a reasonable likelihood of full repayment, the investment adviser will determine fair value using analyses that
include, but are not limited to: (i) a comparison of the value of the borrower’s outstanding equity and debt to that of comparable public companies; (ii) a discounted cash flow analysis; or (iii) when the investment adviser
believes it is likely that a borrower will be liquidated or sold, an analysis of the terms of such liquidation or sale. In certain cases, the investment adviser will use a combination of analytical methods to determine fair value, such as when only
a portion of a borrower’s assets are likely to be sold. In conducting its assessment and analyses for purposes of determining fair value of a Senior Loan, the investment adviser will use its discretion and judgment in considering and appraising
relevant factors. Fair value determinations are made by the portfolio managers of the Fund based on information available to such managers. The portfolio managers of other funds managed by the investment adviser that invest in Senior Loans may not
possess the same information about a Senior Loan borrower as the portfolio managers of the Fund. At times, the fair value of a Senior Loan determined by the portfolio managers of other funds managed by the investment adviser that invest in Senior
Loans may vary from the fair value of the same Senior Loan determined by the portfolio managers of the Fund. The fair value of each Senior Loan is periodically reviewed and approved by the investment adviser’s Valuation Committee and by the
Trustees based upon procedures approved by the Trustees. Junior Loans (i.e., subordinated loans and second lien loans) are valued in the same manner as Senior Loans.
Debt Obligations. Debt obligations are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may
include, but are not limited to, reported trades, executable bid and ask prices, broker/dealer quotations, prices or yields of securities with similar characteristics, interest rates, anticipated prepayments, benchmark curves or information
pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. Short-term
debt obligations purchased with a remaining maturity of sixty days or less for which a valuation from a third party pricing service is not readily available may be valued at amortized cost, which approximates fair value.
Equity Securities. Equity securities listed on a U.S. securities exchange generally are valued at the last sale or closing price on the day of valuation or,
if no sales took place on such date, at the mean between the closing bid and ask prices on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ Global or Global Select Market generally are valued at the
NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid and ask prices or, in the case of preferred equity securities
that are not listed or traded in the over-the-counter market, by a third party pricing service that uses various techniques that consider factors including, but not limited to, prices or yields of securities with similar characteristics, benchmark
yields, broker/dealer quotes, quotes of underlying common stock, issuer spreads, as well as industry and economic events.
Affiliated Fund. The
Fund may invest in Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund), an affiliated investment company managed by Eaton Vance Management (EVM). While Cash Reserves Fund is not a registered money market mutual fund, it conducts all of its
investment activities in accordance with the requirements of Rule 2a-7 under the 1940 Act. Investments in Cash Reserves Fund are valued at the closing net asset value per unit on the valuation day. Cash Reserves Fund generally values its investment
securities based on available market quotations provided by a third party pricing service.
Fair Valuation. Investments for which valuations or
market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Fund in a manner that most fairly reflects the security’s
“fair value”, which is the amount that the Fund might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to
vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar
securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for
exchange-traded securities), an analysis of the company’s or entity’s financial statements, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
B Investment Transactions — Investment transactions for financial statement purposes
are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.
Eaton Vance
Floating-Rate Income Plus Fund
November 30, 2020
Notes to Financial Statements (Unaudited) — continued
C Income — Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of
discount. Fees associated with loan amendments are recognized immediately. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. However, if the ex-dividend date has passed, certain dividends from
foreign securities are recorded as the Fund is informed of the ex-dividend date. Withholding taxes on foreign dividends and capital gains have been provided for in accordance with the Fund’s understanding of the applicable countries’ tax
rules and rates.
D Federal Taxes — The Fund’s policy is to comply
with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its net investment income, and all or substantially all of its net realized capital gains.
Accordingly, no provision for federal income or excise tax is necessary.
As of November 30, 2020, the Fund had no uncertain tax positions that
would require financial statement recognition, de-recognition, or disclosure. The Fund files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three
years from the date of filing.
E Unfunded Loan Commitments — The Fund
may enter into certain loan agreements all or a portion of which may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are disclosed in the accompanying Portfolio of
Investments. At November 30, 2020, the Fund had sufficient cash and/or securities to cover these commitments.
F Use of
Estimates — The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
G Indemnifications — Under the Fund’s organizational documents, its officers and Trustees may be indemnified against certain
liabilities and expenses arising out of the performance of their duties to the Fund. Under Massachusetts law, if certain conditions prevail, shareholders of a Massachusetts business trust (such as the Fund) could be deemed to have personal liability
for the obligations of the Fund. However, the Fund’s Declaration of Trust contains an express disclaimer of liability on the part of Fund shareholders and the By-laws provide that the Fund shall assume, upon request by the shareholder, the
defense on behalf of any Fund shareholders. Moreover, the By-laws also provide for indemnification out of Fund property of any shareholder held personally liable solely by reason of being or having been a shareholder for all loss or expense arising
from such liability. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet occurred.
H Interim Financial Statements — The interim financial statements relating to November 30, 2020 and for the six months then ended have not been audited by an independent registered public accounting firm, but in the opinion of the
Fund’s management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial statements.
2 Variable Rate Term Preferred Shares
Variable rate term preferred shares are a form of
preferred shares that represent stock of the Fund. They have a par value of $0.01 per share and a liquidation preference of $100,000 per share.
On
July 10, 2013, the Fund issued 360 shares of Series C-1 Variable Rate Term Preferred Shares (Series C-1 VRTP Shares) in a private offering to a commercial paper conduit sponsored by a large financial institution. The Series C-1 VRTP Shares had
an original mandatory redemption date of July 8, 2016 that had been extended on various dates through April 7, 2017 upon consent of the holders of the Series C-1 VRTP Shares and approval of the Fund’s Board of Trustees. On
September 30, 2016, the Fund redeemed 170 Series C-1 VRTP Shares at a liquidation price of $100,000 per share, the financing for which was provided by a committed financing arrangement (see Note 7).
Upon completion of the partial redemption of the Series C-1 VRTP Shares, the remaining 190 Series C-1 VRTP Shares were transferred to another large financial
institution (the Assignee) on September 30, 2016 as permitted by the Fund’s By-laws. The transferred Series C-1 VRTP Shares were then exchanged for an equal number of Series L-2 Variable Rate Term Preferred Shares (Series L-2 VRTP Shares),
and the mandatory redemption date was extended to three years from the date of transfer. Effective January 24, 2019, the mandatory redemption date of the Series L-2 VRTP Shares was extended to January 24, 2024. Dividends on the Series L-2
VRTP Shares are determined each day based on a spread of 1.75% to three-month LIBOR. Such spread is determined based on the current credit rating of the Series L-2 VRTP Shares, which is provided by Moody’s Investors Service.
The Series L-2 VRTP Shares are redeemable at the option of the Fund at a redemption price equal to $100,000 per share, plus accumulated and unpaid dividends, on any
business day and solely for the purpose of reducing the leverage of the Fund. The Series L-2 VRTP Shares are also subject to mandatory redemption at a redemption price equal to $100,000 per share, plus accumulated and unpaid dividends, if the Fund
is in default for an extended period on its asset maintenance or leverage ratio requirements with respect to the Series L-2 VRTP Shares. Six months prior to the mandatory redemption date, the Fund is required to segregate in a liquidity account with
its custodian investments equal to 110% of the Series L-2 VRTP Shares’ redemption price, and over the six-month period execute a series of liquidation transactions to assure sufficient liquidity to redeem the Series L-2 VRTP Shares. The holders
Eaton Vance
Floating-Rate Income Plus Fund
November 30, 2020
Notes to Financial Statements (Unaudited) — continued
of the Series L-2 VRTP Shares, voting as a class, are entitled to elect two Trustees of the Fund. If the dividends on the Series L-2 VRTP Shares remain unpaid in an amount equal to two full years’ dividends,
the holders of the Series L-2 VRTP Shares as a class have the right to elect a majority of the Board of Trustees.
For financial reporting purposes, the
liquidation value of the Series L-2 VRTP Shares (net of unamortized deferred debt issuance costs) is presented as a liability on the Statement of Assets and Liabilities and unpaid dividends are included in interest expense and fees payable.
Dividends accrued on Series L-2 VRTP Shares are treated as interest payments for financial reporting purposes and are included in interest expense and fees on the Statement of Operations.
In connection with the transfer of the Series C-1 VRTP Shares to the Assignee on September 30, 2016, the Fund paid an upfront fee of $95,000 and debt issuance costs of $107,733. The Fund paid additional debt
issuance costs of $23,000 in connection with the extension of the mandatory redemption date of the Series L-2 VRTP Shares. These amounts are being amortized to interest expense and fees through January 24, 2024. The unamortized amount of the
debt issuance costs as of November 30, 2020 is presented as a reduction of the liability for variable rate term preferred shares on the Statement of Assets and Liabilities.
The carrying amount of the Series L-2 VRTP Shares at November 30, 2020 represents its liquidation value, which approximates fair value. If measured at fair value, the Series L-2 VRTP Shares would have been
considered as Level 2 in the fair value hierarchy (see Note 9) at November 30, 2020. The average liquidation preference of the Series L-2 VRTP Shares during the six months ended November 30, 2020 was $19,000,000.
3 Distributions to Shareholders and Income Tax Information
The Fund intends to make monthly distributions of net investment income to common shareholders, after payment of any dividends on any outstanding variable rate term preferred shares. In addition, at least annually,
the Fund intends to distribute all or substantially all of its net realized capital gains. Distributions to common shareholders are recorded on the ex-dividend date. Dividends to variable rate term preferred shareholders are accrued daily and
payable quarterly. The dividend rate on the Series L-2 VRTP Shares at November 30, 2020 was 1.97%. The amount of dividends accrued and the average annual dividend rate of the Series L-2 VRTP Shares during the six months ended November 30,
2020 were $212,938 and 2.24%, respectively.
Distributions to shareholders are determined in accordance with income tax regulations, which may differ
from U.S. GAAP. As required by U.S. GAAP, only distributions in excess of tax basis earnings and profits are reported in the financial statements as a return of capital. Permanent differences between book and tax accounting relating to distributions
are reclassified to paid-in capital. For tax purposes, distributions from short-term capital gains are considered to be from ordinary income.
At
May 31, 2020, the Fund, for federal income tax purposes, had deferred capital losses of $12,582,036 which would reduce its taxable income arising from future net realized gains on investment transactions, if any, to the extent permitted by the
Internal Revenue Code, and thus would reduce the amount of distributions to shareholders, which would otherwise be necessary to relieve the Fund of any liability for federal income or excise tax. The deferred capital losses are treated as arising on
the first day of the Fund’s next taxable year and retain the same short-term or long-term character as when originally deferred. Of the deferred capital losses at May 31, 2020, $1,720,456 are short-term and $10,861,580 are long-term.
The cost and unrealized appreciation (depreciation) of investments of the Fund at November 30, 2020, as determined on a federal income tax basis,
were as follows:
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Aggregate cost
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$
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200,070,946
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Gross unrealized appreciation
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$
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1,365,580
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Gross unrealized depreciation
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(6,591,979
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)
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|
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Net unrealized depreciation
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$
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(5,226,399
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)
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4 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by EVM, a wholly-owned subsidiary of Eaton Vance Corp., as compensation for investment advisory services rendered to the Fund.
The fee is computed at an annual rate of 0.75% of the Fund’s average daily total managed assets and is payable monthly. Total managed assets as referred to herein represent total assets of the Fund (including assets attributable to borrowings,
any outstanding preferred shares, or other forms of leverage) less accrued liabilities (other than liabilities representing borrowings or such other forms of leverage). For the six months ended November 30, 2020, the Fund’s investment
adviser fee amounted to $687,420. The Fund invests its cash in Cash Reserves Fund. EVM does not currently receive a fee for advisory services provided to Cash Reserves Fund. EVM also serves as administrator of the Fund, but receives no compensation.
Eaton Vance
Floating-Rate Income Plus Fund
November 30, 2020
Notes to Financial Statements (Unaudited) — continued
Trustees and officers of the Fund who are members of EVM’s organization receive remuneration for their services to the Fund out of the investment adviser fee. Trustees of the Fund who are not affiliated with
EVM may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the six months ended November 30, 2020, no significant amounts have been deferred. Certain
officers and Trustees of the Fund are officers of EVM.
5 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term obligations and including maturities, paydowns and principal repayments on Senior Loans, aggregated
$27,936,480 and $15,722,442, respectively, for the six months ended November 30, 2020.
6 Common Shares of Beneficial
Interest
The Fund may issue common shares pursuant to its dividend reinvestment plan. There were no common shares issued by the Fund for the six months
ended November 30, 2020 and the year ended May 31, 2020.
In November 2013, the Board of Trustees initially approved a share repurchase program
for the Fund. Pursuant to the reauthorization of the share repurchase program by the Board of Trustees in March 2019, the Fund is authorized to repurchase up to 10% of its common shares outstanding as of the last day of the prior calendar year at
market prices when shares are trading at a discount to net asset value. The share repurchase program does not obligate the Fund to purchase a specific amount of shares. There were no repurchases of common shares by the Fund for the six months ended
November 30, 2020 and the year ended May 31, 2020.
According to filings made on Schedule 13D and 13G pursuant to Sections 13(d) and 13(g) of
the Securities Exchange Act of 1934, as amended, one entity and one individual affiliated with such entity together owned 22.5% of the Fund’s common shares.
7 Revolving Credit and Security Agreement
The Fund has entered into a Revolving Credit and
Security Agreement, as amended (the Agreement) with conduit lenders and a bank to borrow up to $64 million. Borrowings under the Agreement are secured by the assets of the Fund. Interest is charged at a rate above the conduits’ commercial paper
issuance rate and is payable monthly. Under the terms of the Agreement, in effect through March 8, 2021, the Fund also pays a program fee of 0.85% per annum on its outstanding borrowings to administer the facility and a liquidity fee of
0.15% (0.25% if the outstanding loan amount is less than or equal to 60% of the total facility size) per annum on the unused portion of the total commitment under the Agreement. Program and liquidity fees for the six months ended November 30,
2020 totaled $206,217 and are included in interest expense and fees on the Statement of Operations. In connection with the renewal of the Agreement on March 9, 2020, the Fund paid upfront fees of $64,000 and, shortly thereafter on
March 20, 2020, the Fund paid waiver fees of $80,000 in connection with a reduction of Fund net asset value during the month of March 2020 due to market volatility; these aggregate upfront and waiver fees are being amortized to interest expense
through March 8, 2021. The unamortized balance at November 30, 2020 is approximately $46,000 and is included in prepaid upfront fees and other fees on notes payable on the Statement of Assets and Liabilities. At November 30, 2020, the
Fund had borrowings outstanding under the Agreement of $49,000,000 at an annual interest rate of 0.21%. Based on the short-term nature of the borrowings under the Agreement and the variable interest rate, the carrying amount of the borrowings at
November 30, 2020 approximated its fair value. If measured at fair value, borrowings under the Agreement would have been considered as Level 2 in the fair value hierarchy (see Note 9) at November 30, 2020. For the six months ended
November 30, 2020, the average borrowings under the Agreement and the average annual interest rate (excluding fees) were $44,377,049 and 0.27%, respectively.
8 Investments in Affiliated Funds
At November 30, 2020, the value of the Fund’s
investment in affiliated funds was $2,756,462, which represents 2.2% of the Fund’s net assets applicable to common shares. Transactions in affiliated funds by the Fund for the six months ended November 30, 2020 were as follows:
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Name of affiliated fund
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Value,
beginning of
period
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Purchases
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Sales
proceeds
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Net
realized
gain (loss)
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Change in
unrealized
appreciation
(depreciation)
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Value, end
of period
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Dividend
income
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Units, end
of period
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Short-Term Investments
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Eaton Vance Cash Reserves Fund, LLC
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$
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1,464,678
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$
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30,809,341
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|
$
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(29,517,429
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)
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$
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(269
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)
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|
$
|
141
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|
|
$
|
2,756,462
|
|
|
$
|
1,691
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|
|
|
2,756,462
|
|
Eaton Vance
Floating-Rate Income Plus Fund
November 30, 2020
Notes to Financial Statements (Unaudited) — continued
9 Fair Value Measurements
Under generally accepted accounting principles for fair value
measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
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•
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Level 1 – quoted prices in active markets for identical investments
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•
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Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
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•
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Level 3 – significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments)
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In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is
determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those
securities.
At November 30, 2020, the hierarchy of inputs used in valuing the Fund’s investments, which are carried at value, were as follows:
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Asset Description
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Level 1
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Level 2
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Level 3*
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Total
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Asset-Backed Securities
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$
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—
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$
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11,280,554
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$
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—
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$
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11,280,554
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Common Stocks
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219,595
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753,793
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273,587
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1,246,975
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Corporate Bonds & Notes
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—
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3,808,603
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—
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3,808,603
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Preferred Stocks
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52,257
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12,220
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80,660
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145,137
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Senior Floating-Rate Loans (Less Unfunded Loan Commitments)
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—
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175,311,774
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290,955
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175,602,729
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Warrants
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—
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—
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1,491
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1,491
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Miscellaneous
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—
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2,596
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—
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2,596
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Short-Term Investments
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—
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|
|
|
2,756,462
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—
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2,756,462
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Total Investments
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$
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271,852
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$
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193,926,002
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$
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646,693
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$
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194,844,547
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*
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None of the unobservable inputs for Level 3 assets, individually or collectively, had a material impact on the Fund.
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Level 3 investments at the beginning and/or end of the period in relation to net assets were not significant and accordingly, a reconciliation of Level 3 assets for
the six months ended November 30, 2020 is not presented.
10 Risks and Uncertainties
Credit Risk
The Fund invests primarily in below investment
grade floating-rate loans, which are considered speculative because of the credit risk of their issuers. Changes in economic conditions or other circumstances are more likely to reduce the capacity of issuers of these securities to make principal
and interest payments. Such companies are more likely to default on their payments of interest and principal owed than issuers of investment grade bonds. An economic downturn generally leads to a higher non-payment rate, and a loan or other debt
obligation may lose significant value before a default occurs. Lower rated investments also may be subject to greater price volatility than higher rated investments. Moreover, the specific collateral used to secure a loan may decline in value or
become illiquid, which would adversely affect the loan’s value.
Pandemic Risk
An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in December 2019 and subsequently spread internationally. This coronavirus has resulted in closing borders, enhanced
health screenings, changes to healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general concern and uncertainty. Health crises caused by outbreaks, such as the
coronavirus outbreak, may exacerbate other pre-existing political, social and economic risks and disrupt normal market conditions and operations. The impact of this outbreak has negatively affected the worldwide economy, the economies of individual
countries, individual companies, and the market in general, and may continue to do so in significant and unforeseen ways, as may other epidemics and pandemics that may arise in the future. Any such impact could adversely affect the Fund’s
performance, or the performance of the securities in which the Fund invests.
11 Additional Information
On October 8, 2020, Morgan Stanley and Eaton Vance Corp. (“Eaton Vance”) announced that they had entered into a definitive agreement under which
Morgan Stanley would acquire Eaton Vance. Under the Investment Company Act of 1940, as amended, consummation of this transaction may be deemed
Eaton Vance
Floating-Rate Income Plus Fund
November 30, 2020
Notes to Financial Statements (Unaudited) — continued
to result in the automatic termination of an Eaton Vance Fund’s investment advisory agreement, and, where applicable, any related sub-advisory agreement. On December 18, 2020, the Fund’s Board
approved a new investment advisory agreement. The new investment advisory agreement will be presented to Fund shareholders for approval, and, if approved, would take effect upon consummation of the transaction. Shareholders of record of the Fund at
the close of business on January 15, 2021 who have voting power with respect to such shares are entitled to be present and vote at a special meeting of shareholders to be held on February 26, 2021 and at any adjournments or postponements
thereof.
Eaton Vance
Floating-Rate Income Plus Fund
November 30, 2020